How Digital Supply Networks alter the traditional supply chain

Digital Supply Networks will change the supply chain landscape dramatically. In such networks, a continuous exchange of information, goods and services exists between the physical and digital world.

Guido diepen & Naser bakhshi - 27 March 2017

Last year a supply chain expert predicted on Forbes.com that in 2017 'high performing organisations will recognise supply chain and procurement operations as critical differentiators’. Of course they will, I would add to this prediction. Moreover, these organisations probably are the early adopters of Digital Supply Networks.

Traditional supply chain planning consists of a set of linear nodes, which are difficult to connect. Up until now, most organisations use cluttered spreadsheets and gut feeling to try to improve the quality and efficiency of the supply chain; stakeholders each use different indicators while talking about the same topic, which complicates planning and prediction.

Continuously shifting playing field

At the same time, new and disruptive technologies and growing amounts of data constantly affect the supply chain. As a consequence, organisations struggle to maintain an agile, flexible and transparent supply chain: one capable of coping with a continuously shifting playing field.

What we see is that the high performing organisations that recognise supply chain operations as critical differentiators are combining information technology and operations technology to create value in new and different ways.

They use Digital Supply Networks, which are cyber-physical systems that contain connected products, customers and supply chains. Digital Supply Networks transform the traditional, linear supply chain nodes (e.g. planning, sourcing, support) into a set of dynamic networks, allowing dramatically increased differentiation. In such networks, a continuous flow of information, goods and services exists between the physical and digital world: a ‘digital mirror’ of the physical world.

Supply chain analytics

The ‘digital mirror’ that reflects the physical world creates enormous amounts of data, which must be safely stored, easily accessed and dynamically analysed to gain new insights and improve (collective) decision-making across the network. That is why supply chain analytics is one of the most important success factors of the Digital Supply Network. It cannot only help to improve decision-making and to ensure interoperability throughout the supply chain, it can also provide insight in the biggest risks for the supply chain and mitigate them by calculating scenarios.

But there are also other important challenges that influence the functioning of the Digital Supply Network. The interconnectedness of these networks brings extra cyber security risks that must be covered. Besides that: new skills and capabilities are required to understand and engage with all aspects of these networks. These are skill sets which are already in short supply and organisations will face a new host of competitors in the talent acquisition process.

Creating these networks requires reliance on a broader set of collaborators and technologies, which increases value opportunities but also complexity within the supply ecosystems. And the processes for implementing technology systems probably need to be upgraded: agile system development and deployment is required in this quickly changing technology landscape.

In the 4th industrial revolution, leading companies are combining information technology and operations technology to create value in new and different ways. In this age, more than ever, an agile, flexible and transparent supply chain can be a critical differentiator for organisations. Are you ready to change your traditional supply chain into a Digital Supply Network?

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